Asia

With China’s Lianghui or ‘twin sessions’ – the National People’s
Congress (NPC) and Chinese People’s Political Consultative Conference
(CPPCC) – underway in Beijing, chinaworker.info
asked a panel of socialist activists to explain the trends taking place
in China. Vincent Kolo is editor of chinaworker.info,
Wang Linyu is a young mainland activist and Jor Yen from Hong Kong is
active in Socialist Action and writes for the CWI’s Chinese magazine
Socialist.

What is the main conclusion we can draw from the twin sessions of the
NPC and CPPCC now meeting in Beijing?

Vincent: These assemblies are just echo chambers for the decisions
already made by the top leadership of the CCP (so-called Communist
Party) dictatorship. In recent years the NPC and CPPCC have mainly
attracted attention as the world’s leading billionaires’ clubs. This
year there are more than 100 billionaires among the delegates. It is
reported that the 10 richest delegates in the NPC are currently worth
184 billion US dollars, which is 100 times the wealth of the ten richest
US congressmen.

Xi Jinping and the CCP regime are using this year’s meetings to beam a
message around the world that the state of the Chinese economy is not as
bad as widely believed. In reality, below the surface, the mood is quite
desperate. Many sections of the elite, in common with the global
capitalists, are extremely worried. Many regions of China are facing
severe pressures, with floundering economies and utter confusion over
how to carry out the policies decided in Beijing. The regime’s recent
steps to further tighten media controls – effectively outlawing bad
economic news – is another sign that things are very serious indeed.

Yen: If the meetings show anything, it is that the Chinese government
cannot offer any real solutions for its economic crisis and the next
wave of big attacks on the working class is coming. The announcement of
5-6 million job cuts (reported by Reuters) in the state-owned industrial
sector shows this. At the NPC the government promised compensation – a
100 billion yuan ‘resettlement fund’ – for laid-off workers. But the
funds are too small to cushion the pain for workers and the affected
regions, while local governments are close to bankrupt in many regions.
Workers in the affected industries are not getting paid now in many
cases, so what guarantees do they have they will receive the
‘resettlement’ payments?

Linyu: The government does not want any controversy – it wants to
project unity at the national meetings. But one of the most publicised
speeches was by finance minister Lou Jiwei, who launched a big attack on
the Labour Contract Law, saying it ‘overprotects’ workers and puts too
big a burden on the capitalists. Lou is a spokesman for the capitalists
and the most neo-liberal wing of the elite. These groups blame “too
rapid wage growth” for the crisis in the Chinese economy. In fact, with
the increased costs of housing and other essentials, real wages have
barely kept pace. Lou’s comments fit a wider pattern: that massive
layoffs and attacks on jobs, wages and workers’ rights are coming.

At the NPC we heard many top officials including Li Keqiang say there
will be no “hard landing” in China. What is your view?

Vincent: The regime is in damage control mode. There has been a
succession of speeches by Xi, Li, central bank governor, Zhou Xiaochuan,
and others to talk-up China’s economy and restore ‘confidence’. This was
evident at the G20 finance ministers’ meeting in Shanghai (25-26
February) and it’s continuing at the twin sessions.

The CCP is attempting to regain its footing after a disastrous start to
the year, the worst ever for global stock markets including China’s. The
Chinese stock market is the world’s second worst performer in 2016 after
Greece – and that’s despite the government’s ‘national team’ intervening
to prop up the stock market during the NPC and CPPCC meetings, because
they don’t want a new stock market rout to spoil things. There are
several issues that are a lot more serious. Capital flight at
historically unprecedented levels is a much bigger worry for Beijing. A
report from Bloomberg Intelligence says 1 trillion US dollars left China
in 2015. This reflects a collapse of confidence of the capitalists in
the Chinese economy and a search for ‘value’ outside its borders.

Linyu: The regime tries to hide the full extent of the economic
problems. They also use grand sounding plans to subdue the mood of
crisis. For example, they have identified de-stocking of the big
inventory of unsold houses (numbering many millions across China) as a
priority in 2016. This is mainly in the 3rd and 4th-tier cities which
account for 67 percent of housing construction. This is where the
property crash has been most severe. The regime’s solution is moving
more migrant workers into these cities as the main way to achieve
de-stocking and creating new housing demand. But this idea is widely
known as impossible because wages will be reduced further as a result of
the slowing economy. Today, in many areas, migrants are leaving the
cities because there are no longer any jobs.

A capitalist and former property mogul Ren Zhiqiang may be more
“rational” when he says the only way is to demolish those unsold
buildings. This is actually happening in some cities. This also shows
the contradiction with the government’s reform plans. The majority of
working people are on low wages; they lack the spending power to resolve
the problems of overcapacity and to turn China into a consumer-driven
economy. Without this, the government keeps increasing the debt to avoid
the total collapse of the economy, but it will only lead the economy
into a prolonged stagnation, such as Japan.

Yen: The stock market crisis last year in June and this year in January
already showed that the Chinese government is unable to control the
economy. They are trying to avert a hard landing by using stimulus, more
credit and loose monetary policies. This means China is more likely to
go into a Japanese model of economic crisis: very high debt with slow
growth, non-profitable zombie companies, low consumer power as people do
not want to spend money. But with China’s political system, this kind of
economic crisis will have much more serious social consequences than
Japan in the 1990s and 2000s, which can mean a revolutionary mass
upheaval.

The government is discussing big job cuts in heavy industries like steel
and coal mining. How likely are these cutbacks in the short-term and how
will workers react?

Yen: There have been increasing numbers of workers’ protests and
struggles over the past two years. The number of strikes in 2015 was
2,774 – more than double the level in 2014. Around ninety percent of
strikes are about unpaid wages or unpaid pensions. If the government
really cuts as many workers as the 5-6 million announced recently, the
rise of unemployment will cause a social explosion (they don’t have the
resources to create new jobs for so many people).

Already, during the time of the NPC meeting, more than ten thousand coal
miners and their families in Heilongjiang province have been protesting
on the streets. Over 80,000 of these workers have not had their salaries
paid for six months. The workers were heavily repressed by police. One
of the slogans the workers shouted was “CCP give us back our money”.
This shows the consciousness of workers is rising, more and more against
the central government and the party, instead of only targeting one boss
or the local government officials. These workers are from the Longmay
Mining Company, the biggest state-owned coal company in the region,
which announced last year that 100,000 coal mining jobs will be cut. The
workers have been protesting for months.

Vincent: The reports of 5 to 6 million redundancies means over 15
percent of the workforce in the state-owned enterprises, which is
currently 37 million strong. The axe is falling in steel and coal, where
1.8 million jobs are being cut according to Social Security Minister Yin
Weimin, but also in glassmaking, cement and shipbuilding.

The government wants to stagger the closures and job losses to avoid
mass unrest, through a “gradual” process of mergers and consolidation of
different companies with excess capacity. But as these incredible
protests by coal miners in Shuangyashan (Heilongjiang province) show,
workers in the coal and steel industries and other heavy industries are
already facing massive cuts and non-payment of wages.

In the case of the Shuangyashan workers, the governor of the province,
Lu Hao, lied during the NPC meeting by saying there were no cases of
wage arrears among the miners. He was forced to admit the truth as a
result of the mineworkers’ protests. This is a rare example of reality
intruding upon the carefully choreographed fantasy world that the top
officials are trying to project at the NPC.

The capitalists are more and more worried that Xi Jinping’s promised
economic reforms have stalled or even gone backwards. Is this fear
justified and, if so, why is this happening?

Yen: Yes, the so-called reforms have stalled and this was always the
most likely outcome. The CCP cannot afford an even slower economic
growth because it would mean social and political explosions. The 6.5-7
percent growth target as they announced at the NPC meeting is not likely
to be achieved. But they are forced to go back to the old road to
stimulate the economy with more credit (so that companies can repay the
old loans by borrowing new loans). This will continue to increase the
debt, especially of the already highly indebted state-owned companies.
So the CCP government is in a dilemma, as they know that faster economic
reforms increase the likelihood of a hard landing. That’s why they are
afraid, as every small step of reform must be very carefully carried out
to prevent a chain reaction of collapse of companies and financial
products.

Linyu: In words, the government continues to adhere to the reform as the
way to overcome difficulties it is facing, but their actions will depend
on the changing situation including the problem of overproduction and
the poor prospects for the economy. They still use the slogan “stabilise
growth and promote reform”, while this is becoming more and more of a
contradiction. So there are divisions inside the regime. Some insist
that only reform can overcome the difficulties, while others believe
that the current difficulties result from reform itself.

Vincent: The capitalists don’t know what they want. This goes for the
global economy just as much as for China. From the standpoint of their
system, of capitalism, they need Xi to carry out the structural reforms
to avert a debt crisis and financial meltdown in China, which would be
devastating for global capitalism. But sometimes the ‘cure’ is worse
than the disease. The effect of mass plant closures and killing off the
‘zombies’, as they are called, could tip the whole Chinese economy into
a recession or hard landing.

Given the international effects already from the slowdown in China,
imagine how a Chinese recession would play out. Already we see that
China, officially growing at close to 7 percent, has exported economic
crises to Brazil, Chile, Canada and the former ‘miracle’ economies in
Africa.

I don’t think the Chinese regime has a master plan. I think they are now
forced to improvise almost from one week to the next, trying to deal
with contending and contradictory pressures. The CCP is pushing the idea
of “supply side reforms”, borrowed from Reagan and Thatcher, of tax cuts
for businesses, opening the state sector to more private capital and so
on. None of this is particularly new. It’s a repackaging of previous
reform promises. This is part of Beijing’s effort to convince the
capitalists that everything is under control and the reforms are still
alive.

Is the repression and media censorship getting more severe in China?

Yen: Yes. Last year in July over 300 civil rights lawyers were arrested
in a coordinated national crackdown. Also, the CCP has ‘globalised’ its
attack by arresting people overseas. They kidnapped the five booksellers
in Hong Kong and Thailand and forced them to confess on TV. They are
also charging arrested dissidents with ‘subversion of state power’, a
more serious crime than ‘inciting subversion’ which they used before.
This charge means life imprisonment in the worst case.

Vincent: Under Xi we have seen an unprecedented degree of authoritarian
control. Just before the NPC and CPPCC meetings, Xi toured the offices
of the national media and read the riot act, ordering them to “love the
party and protect the party”. Especially the economic news and data is
now being much more closely controlled by Beijing’s censorship
machinery. The result will be that even fewer people will believe the
official statistics. This is why the business magazine Caixin, which has
enjoyed official protection and tolerance in the past, took the unusual
step of protesting state censorship last week. They resent the new
limits on their powers to report economic affairs. Economic journalism
was previously a ‘safe zone’, relatively speaking, allowing more open
debate and dissenting views, because of course without that you are
going to get even bigger mistakes.

Rather than a mark of strength or confidence, Xi’s policies show the
opposite. His elite-level purge and the crackdown on lawyers and NGOs
shows a deep-seated fear of political instability. The scramble for top
positions is now beginning in the run up to the 19th Congress next year,
with Xi wanting to consolidate his support and avoid being checked by
rival factions.

Why is this repression happening?

Linyu: Because the regime is facing a sharp economic slowdown and the
number of strikes and protests is increasing. Anger against the rich is
very widespread in Chinese society now. The CCP must increase repression
to prevent workers and the mass of people from organising independent
forces. Politically, the regime is unstable and split. When the ruling
elite is shown to be openly split it will increase the confidence of the
masses to revolt.

Yen: Increasing repression is also a way for Xi Jinping to centralise
the power over the army, police and security forces. He wants to
increase control over the party-state machinery. Also, the CCP is
inciting nationalism to divert the discontent of the masses against
other countries. They accuse the NGO activists and civil rights lawyers
of being “backed by Western forces” to argue that people should “unite”
together to support the Chinese government against Western countries.

Vincent: The potential for cracks and splits within the state are the
main reason for the increased repression. This, and the fear of an
upsurge in mass unrest. The regime fears the dam will burst if even the
smallest stone is removed – that the pressures that have built up within
all levels of society, including within the elite, can explode in
uncontrollable conflicts. Of course this is contradictory: the more the
regime increases repression, the bigger the eventual explosion. This is
similar to its economic policies, which also stoke up bigger problems
for the future. But given a choice they prefer to take the crisis later
rather than immediately.